COMMUNITY RECORD-KEEPING, FINANCIAL MANAGEMENT AND PROCUREMENT

1. COMMUNITY-DRIVEN RECOVERY AND DEVELOPMENT PROJECT (CDRD) COMMUNITY RECORD-KEEPING, FINANCIAL MANAGEMENT AND PROCUREMENT Training: South-central Project Coordination Unit (PCU) Hargeisa – September 28, 2009 Based on NSP training documents

2. World Bank General Principles and Aims - CDRD projects • Communities must be involved in preparing and implementing subprojects to achieve project ownership and sustainability • Procedures should be kept simple, with a high degree of accountability • Procedures should be sufficiently transparent • Many of the decision making and management responsibilities delegated to communities to strengthening their capacities

3. ROLES AND RESPONSIBILITIES OF ALL PARTIES

4. Communities • Mobilizing community contribution • Monitoring project activities • Monitoring implementation (day-to-day progress) • Monitoring procurement of materials/services

5. Community Development Committee CDC • The CDC is responsible for managing the overall implementation of the subproject including • Overseeing procurement • Bookkeeping and Accounting • Supervision • Storage • CDC members elect officers to serve as chairman, vice- chairman, treasurer, M&E focal pint and secretary. • The CDC needs to form the project management committee and the procurement committee. • Nobody is above anybody else. Even the CDC officials are not more important than other CDC members without a specific office.

6. CDC-Project Management Committee …(1) • Composition • 6-7 members • Chairman • must have the capacity to facilitate and observe group decision-making processes. • helps the group to run meetings that produce good outcomes • Treasurer • Manages the community fund • Trustworthy, reliable, and familiar with accounting procedures • it is still possible to appoint competent treasurer assistants outside the CDC • Secretary • Documents and notes the decisions made during CDC meetings has good writing and reading skills, • Capable to presenting reports to the community

7. CDC-Project Management Committee …(2) • Operating the project bank account with “Dahabshiil” • To be opened only after the IOSC approves the sub-project • at least three signatories • Use of checks (?) • Collecting/monitoring community contributions • Can be collected before the implementation begins • Can be in the form of cash or in-kind contribution (sand, bricks, labor.) • CDC needs to issue receipts (pre-numbered if possible) for the cash received. • Cash needs to be deposited in the community bank account (?)

8. CDC-Project Management Committee …(3) • Financial Management and bookkeeping • Maintaining receipts, labor registers, and other supporting documents for all expenses (all expenses have corresponding documentary evidence) • Maintaining a stock register of materials stored for more than 3 days before use • Maintaining a cash box and a cash book. Cash to be kept in a secure location with restricted access by a responsible person nominated by the CDC • Maintaining a register of all cash, labor, and material contributions from the community

9. CDC-Project Management Committee …(4) • Completing project reports periodically to the project financial agent (DRC) • Financial reports • Internal control checklist • Physical progress reports (Engineer) • Reporting to CDC regularly • Progress reports are provided through community meetings, announcements during prayer meetings (minutes and attendance records of these meetings must be kept) • All financial information need to be posted in public places (ex., public notice boards) • Making all subproject accounting documents available for inspection • Explaining the contents of the MOU to the community members

10. CDC-Project Management Committee …(5) • Overseeing construction and monitors day-to-day progress • Safe storage of materials • Maintaining stock record-keeping system (More than 3 days need to be recorded) • Designating persons responsible for • stock management • recordkeeping of stocks in storage • transfers of subproject materials

11. CDC - Procurement Committee…(1) • Composition • Chair and 3 members • The members should not includes the • The chairman • The secretary

12. CDC - Procurement Committee…(2) • Developing procurement plan (with the support of DRC) • what is to be purchased • when it is to be done • and by whom • Procurement committee meets only if there is a request and all four members must be present • Procuring materials and labor (skilled and unskilled) • Plan shopping trips in advance • When pricing the materials, Include transport costs • Getting at least three quotations • Compare and choose the best quality for the best price. • Insuring that all the materials needed for each phase of construction are available. • Get receipts from vendors for all purchased goods

13. Danish Refugee Council (DRC) • The DRC as the “financial agent” will be responsible for all fiduciary responsibilities related to implementing subprojects • DRC is responsible for ensuring that sound business practices are applied, which assure competitiveness, cost effectiveness and transparency through • Provide capacity building and training for CDC members (with PCU/UNICEF/STIPA) • Monitor project implementation • Verify subproject expenditures • Facilitate timely financial disbursements to communities • Provide/coordinate technical supervision visits • Oversee procurement of materials/services

14. Project Coordination Unit (PCU) …(1) • Providing technical support and guidance to the community throughout the project cycle (e.g., develop standard designs) • Assessing the CDC capacity (literacy rates, bookkeeping skills) • Carrying out internal audits • Developing Management Information Systems to support project activities: • Financial Management System • Documents Management System • Project Management System • M & E System

15. Project Coordination Unit (PCU) …(2) • Maintaining unit cost database • The database is maintained by the PIU and includes costs of all types of items purchased at the community level (in U.S. dollars) • It is used as a way of cross-checking prices proposed by communities • Prices proposed in community budgets are used to update the database regularly • The database must be kept up-to-date and take into account price fluctuations. ( and regional price differences) • Maintaining Contractor Database • Include details of local contractors such as: performance, prices and contact information • The list will help communities with no prior experience working with contractors • Black list of contractors is made available to communities

16. CDRD Procurement

17. Purchasing vs. Procurement activities • “Purchasing” means that a person can spend the money as he or she individually deems appropriate. • “Procurement” means that a person wishing to purchase a good must follow certain regulations and rules for making a purchasing decision. • For example: a private person may buy sacks of cement at his or her favorite dealer. However, procurement rules in CDRD require that a person must check out at least three dealers and compare prices and quality first, and then come to a decision • the person is not allowed to buy at his/her preferred dealer if the price is higher or the quality of the offered product is lower. • checking prices and quality of products of at least three dealers is an example of a typical procurement regulation.

18. Procurement Policies – Why? • Procurement policies have various benefits: • Prevent corruption, cheating, and nepotism • Promote honesty, constructive competition, fair pricing of goods and quality of products • The purpose of procurement policies is to ensure fairness and transparency: • Unity, solidarity and trust are more likely to prevail • Conflicts and distrust are less likely to occur • A training about CDRD procurement is therefore directly linked to the overall purpose of CDRD, namely to promote transparency and accountability.

19. CDRD Procurement Policy

20. Questions … • What is the purpose or wisdom of requesting the collection of three quotations of three different non-related dealers before making a purchasing decision? • What is the purpose or wisdom of requiring consultation between four persons before making a purchasing decision? • What is the purpose or wisdom of insisting in the purchase of goods that are not only cheap but also of good quality? • What is the purpose or wisdom of procurement regulations in general?

21. Financial Management and Book-keeping At the Community Level

22. Memorandum of Understanding (MOU)- Intro • The MOU is a contract between DRC and the beneficiary community based on lump-sum • The community is treated as a contractor (in case of self-implementation mode) • Budget deficit/savings. • Budget deficit: Increasing community contributions or reducing subproject scope • Budget Savings: communities can utilize budget savings without having to go through the formal process of approvals. • future improvement/expansion • operation and maintenance • any new activity that will benefit the majority of beneficiaries

23. MoU Components • Scope of activities to be covered/time frame • Amount of funding • Terms and conditions of payments • Financial management requirements • Payment schedules (linked to activity schedules/milestones) • Roles and responsibilities of all parties before, during, and after implementation. • Any attachments, including bills of quantities (for materials, equipment, furniture, administration), material transport cost schedules, labor cost schedule, community contribution cost schedule, basic price list, works schedule

24. Community Record-Keeping and Accounting • At the community level, it is important to keep simplicity as a primary objective. • Key principles to apply to the community accounting system include: • Use of Somali language • all transactions should be recorded in simple formats • Supporting documents should be retained • As few forms as possible should be used, focusing on the needs of the community

25. Good practices … (1) • Segregation of Duties • No financial transaction is handled by only one person from beginning to end • No individual should be able to initiate, authorize, execute, or record a transaction without the active involvement of someone else • For cash disbursements, this might mean that different people authorize payments, sign checks, record payments in the cash book.

26. Good practices … (2) • The measures should not unjustifiably slow the flow of funds or project implementation • Accountability should be built at the community level using accountability mechanisms: • Participation • Use of Somali language for all community records and their communication • Putting all information into the public domain in open meetings and posting salient information in public places in Somali language

27. Disbursement Procedures

28. Tranche System of Disbursing - Intro • A “Tranche” is a periodic payment • A key monitoring tool that allows for greater control and oversight • Ensures that funds are accounted for properly and technical quality is maintained throughout the implementation process

29. Tranche System of Disbursing • Several tranches based on physical and financial progress • Each tranche is a percentage of total subproject costs • Initial Tranche: Released to the community upon signing the MOU • 2nd and Subsequent Tranche: Released to the communities upon fulfillment of the conditions stated below: • The receipt of written request from he CDC as stated in the MOU • Financial report: Justified utilization of at least 70% of the preceding tranche (accompanied by supporting documentation) • Internal controls checklist • Physical progress report: Up-to-date • Copy of the latest bank statement